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Trading and Investment Terms

Commodities

Commodity is a basic good or raw material which is used in commerce and interchangeable with other commodities of the same type. Commodities are used in the production of other goods. The quality of a commodity may slightly differ but essentially uniform across producers. When commodities are traded on an exchange they have to meet some specific minimum standards. These minimum standards are also known as basis grade. Two equivalent units of the same commodity have uniform price anywhere in the world. It is excluding local actors such as transportation cost and taxes. Usually, commodities are traded in large quantities to support liquidity and efficient global trading. Some examples of commodities are grains, gold, metals, oils, and natural gases.

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